World’s largest pension funds grew by less than 2% in 2011

Total assets of the world’s largest 300 pension funds grew by less than 2% in 2011, according to research by Towers Watson and US investment newspaper Pensions and Investments.

The P&I/Towers Watson global 300 research found that the growth in assets in 2011 was the lowest since 2003, except for a 13% decline in 2008.

By individual region, the research found that Asia-Pacific has the highest five-year growth rate of 9% compared to Europe (6%) and North America (0%), while the Latin American and African regions have a combined growth rate for the same period of under 8%, albeit from a low base.

The research also found that the world’s top 300 pension funds now represent over 46% of global pension fund assets.

Defined benefit (DB) pension schemes account for 70% of total assets. In 2011, DB assets grew by over 1%, compared to under 4% for defined contribution (DC) assets.

The research also found:

  • The US remains the country with the largest share of pensions fund assets, accounting for 34%.
  • Japan has the second-largest market share with over 17%, largely because of its Government Pension Investment Fund.
  • The Netherlands has the third-largest market share with over 6%.
  • The UK and Canada are fourth and fifth largest, respectively, with over 5% share each.  
  • 47 new funds entered the ranking during the past five years, mainly from Australia (8), Mexico (4), Germany (4), Finland (2) and Russia (2).
  • During the same period, the US had a net loss of 19 funds from the ranking, yet it still accounts for 121 funds in the research.
  • The UK is the next highest with 27 funds, down by two funds from five years ago.
  • Australian funds grew at the fastest rate during the five-year period to the end of 2011, 18% in US-dollar terms, followed by Brazilian funds with 14%.
  • During the same period, the top Mexican, Danish, Taiwanese and Japanese funds grew at 11%, 10%, 9% and 6%, respectively, in US-dollar terms.

Carl Hess, global head of investment at Towers Watson, said: “Asset allocation for the world’s largest pension funds has changed markedly during the past six or seven years to be much more defensive in view of the ongoing economic uncertainty.

“The top 20 funds, on average, now have roughly equal amounts in equities and bonds, and the rest in alternatives and cash.

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“At the same time, Asia-Pacific funds, in particular Japan, have maintained much higher allocations to bonds in keeping with prevailing investment beliefs and risk tolerance there.”

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